Good morning! Lucy Brewster here, filling in for Sheryl.
When A.I. voice company SoundHound went public via a SPAC in April 2022, it was entering a brutal market—and the company, which provides brands with A.I.-powered voice features and saw huge growth in 2021's bull market, hit a drought. In January 2023, the company laid off nearly half of its staff in a massive restructuring. "We went out in a very difficult market where interest rates were really putting a lot of pressure on technology stocks and there was pressure to get profitable sooner than originally anticipated," explained CFO Nitesh Sharan to Fortune.
That was then. When I spoke to Sharan last week, he had a very different tale to tell. In April 2023, the company scored $100 million in financing from Atlas Credit Partners. Sharan was in New York meeting with investors when we spoke. "Now, carrying on some highlighted attention on A.I., there's absolutely just an almost insatiable appetite for our story," he said. "While challenging, [being in the public market] set us up for where we are now, which is much more stable, better, and stronger balance sheet and much greater opportunity that's only accelerated because of the A.I. attention," he explained. He added that beyond investment opportunities, he sees increased customer interest in the product because of the recent popularity of companies like OpenAI. "A huge number of people who are coming back saying, 'How do we intersect this with generative A.I.?'" he explained. Year to date, SoundHound's stock is up 155%.
A.I. video avatar company Synthesia, which is private, has also been supercharged by cash from investors who approached the company at a time it wasn't even looking to fundraise. Cofounder and CFO Steffen Tjerrild told Fortune that the firm's $90 million Series C round led by Accel will be used primarily to streamline Synthesia's research process. "Despite the fact that we have built a self-sustaining business and weren’t necessarily looking for new capital, we jumped at the opportunity to work with a top-tier VC like Accel," said Tjerrild. "Since founding the company in 2017, our team has been working to solve some of the toughest challenges in A.I. and building all our core technology in-house," he said.
Yet so much opportunity and fuel for expansion can paradoxically create a challenge for CFOs, who are often responsible for keeping everyone grounded in reality. "One of the biggest challenges for CFOs is prioritization, especially in a space like A.I. where the possibilities for where you can invest time and money are almost infinite," said Tjerrild. Sharan also noted that the job of staying calm amid the highs and lows is a key skill in the CFO role. "On the corporate side to investors and with active engagement, there's a lot of ideas that come about, and we have to balance and stay focused," he explained. "I need to manage this duality, I have to ensure that we're driving operating efficiencies," he said.
With technological leaps, there's also increased competition. Sharan explained that access to generative A.I. tech allows far more startups to enter the A.I. space. "Because of the buzz and all of the VC capital going into this, generative A.I. does unlock a lot of opportunity, yet it does lower the hurdle technologically for some who do have core capabilities to jump in," he explained. "I think that's both an opportunity and a threat," he said.
Lucy Brewster
lucille.brewster@fortune.com
